BB 2012-02-21 Pascal Lamy speaks on the challenge of feeding 9 billion people

Pascal Lamy speaks on the challenge of feeding 9 billion people

Director-General Pascal Lamy, in a speech at The Economist Conference “Feeding the World” on 8 February 2012 in Geneva, said “let us get our policy mix right on food production and on trade. We need to ask the difficult questions”.

Excerpt of his speech:

Feeding the World — The 9-billion people question

It is an honour to be here with you today and to share the very timely preoccupation of the Economist — and participants alike — about global food security. Will we be able to feed the world today, and will we be able to feed it tomorrow, is the question.

Back in 2007, the Economist placed a very provocative title on its cover: Is it the “End of Cheap Food,” it asked. I would argue that we need to start by reframing the question if our goal is to achieve long-term food security. Food prices, their ups and downs, or “volatility” as many now like to say, are but a manifestation of the underlying fundamentals of the food market. It is to those fundamentals that we must turn our attention.

To explain. Back in 2008, the world faced what it called a “food price crisis”. Since then, prices have started to fall, albeit remaining at a higher plateau than previous years because of, amongst other factors, the nutritional transition that the world is undergoing. But does that mean that the food crisis is over? Does it mean that food security has been attained? It has not. Food prices fell since 2008 only because a global recession kicked-in to depress demand. We must also remember that while higher food prices are bad news for some, they are good news for others — I speak here of farmers. In the late '80s nothing was seen as a bigger catastrophe than low prices, and that’s when many government support programmes started to kick-in.

If our goal is to get to the causes of food “insecurity”, if our goal is to ensure that we have agricultural systems that are able to generate safe and sufficient food, feed and fibre, than we will need to ask broader questions. Perhaps even some troubling ones. But I understand, of course, the temptation of politicians to frame this debate around “price” or “volatility”; after all, high food prices can and have brought governments down.

Let me share with you some of my thoughts, then, on what we ought to be asking, after which I will turn to the international trade picture. First, is it safe that the world’s agricultural food production remains concentrated in only a handful of countries?

Today, five countries produce 70% of the world’s rice, three countries produce 80% of our soybeans, five countries produce 70% of our maize. And this concentration of production is mirrored, if not even accentuated, in international trade. For example, 85% of all soybeans on the international market are exported by only two countries. Surely, we are gambling with our future if we do not improve the agricultural policies that are preventing this sector from taking off in other corners of the globe.

Which takes me straight to Africa; a continent about which we must also ask ourselves some very probing questions. It is 1/7th of the world population, but 1/4th of its under-nourishment! It is also the continent that is experiencing the fastest population growth. Africa is one of the regions of the world with the lowest levels of intra-regional trade in food. When Africa needs food, only 10% of it comes from other African countries, and the rest has to be brought in from elsewhere. Yet in my opinion, Africa is the “missing part of the food security puzzle”. It is the continent with the greatest amount of arable land left fallow. If Africa is seen as a food security problem today, it may very well hold the key to global food security tomorrow.

So here is the question then, what will we do about Africa? A continent that continues to experience very low yields, much below the global average, for many agricultural commodities. Take maize for instance. The global average is 5 tons per hectare, while the African average is 1.8. There are many reasons for this situation: policies to tax farmers, to split the land, limited access to credit, a wanting infrastructure, and rich world agricultural subsidies, are prime amongst them. In fact there is no business more complicated than agriculture, contrary to popular perception that services and manufacturing are somehow more difficult.

If we want to see progress in our food security, we will have to re-examine the many policies that hold this sector back in parts of the world where sun, water and fertile soils abound.

The Brazilian miracle, ladies and gentlemen, can and should be reproduced. In less than 30 years, Brazil turned itself from a food importer into one of the world’s breadbaskets. In those same 30 years, Africa went from being a net food exporting continent to being a net food importer. But there are success stories in Africa too, on which we must build on. Just last week in Addis Ababa I visited the Ethiopian Commodity Exchange and saw how this project, through the greater price transparency that it has brought, is revolutionizing Ethiopian agriculture. Or take Mali’s success story in mangos. With Dutch assistance they overcame the problem of refrigerated transport. The outcome now is that Dutch aid has been progressively replaced by Dutch buyers. And while I have focused on Africa, there are other parts of the world too where a change of policies could turn the situation around.

Let me now come to international trade. International trade plays an important role in global food security. By fostering greater competition, trade allows food to be produced where this can be most efficiently done. With the climate crisis, whose beginnings we are now beginning to witness, it will become imperative that we produce food in the right places, and not where we would be wasting scarce water or other natural resources. As Egyptians like to tell me: if we were to aim for self-sufficiency in food, we would need not one, but many River Niles. And despite what some environmentalists like to say about the “carbon footprint” of international transportation, when the bigger environmental picture is taken into account, it is my firm conviction that trade in food becomes an environmental obligation.

Trade in food, ladies and gentlemen, is also a moral obligation. International trade allows food to move from countries with a surplus to countries with a deficit. It is a “global transmission belt”, if you will. From a purely ethical point of view, it is vital that we allow, and even facilitate, the ability of a country to sell food to another, in particular when that other is suffering from a drought or another natural disaster. Food must travel.

Today, trade in food looks nothing like it did ten years ago. Back then, the world’s top ten exporters of food did not include a single developing country. Today, Brazil is the world’s 5th biggest exporter, and China its 8th. China’s rise has also brought other spectacular changes to the world food market (in fact, to all commodity markets). Upon its entry into the WTO in 2001, China went from being a net exporter of food, to being a net importer. With 20% of the world’s population and rising income, it is not only demanding more food, but also different kinds of foods (meats and horticultural products).

While trade in agricultural products is only 7% of world trade, we are nevertheless dealing with a much more integrated global food market. Two-thirds of all countries in today’s world are net food importers, and only one-third are net exporters. Furthermore, trade in food is more sophisticated today, with about two-thirds of international trade being in processed products. The bulk of international trade in food, though, remains regional, like the rest of international trade. Seventy per cent of Europe’s trade is with Europe, not just in food, but in all products, and 50% of North America’s and Asia’s trade is intra-regional. Twenty-five per cent in the case of Latin America. Africa, as I said earlier, stands out for its difference in this regard.

Agricultural trade has been revolutionized over the years by improved transportation, containerization, and better information technology. Because of the perishable nature of many agricultural products, speed is of the essence, so any improvement affecting the speed of transmission from source to final destination automatically benefits agriculture.

But just as poor policies hold agricultural production back, poor policies are also holding back the necessary revisions of the global rule-book on agricultural trade. In other words, the WTO rule-book, or Bible as some call it. The conclusion of the Agreement on Agriculture in the Uruguay Round in 1994 was a historic event, no doubt. It brought agriculture firmly under the purview of world trade rules. But it was, nevertheless, unfinished business, as evidenced by the rendezvous that countries gave themselves for further negotiations.

Today, high trade-distorting subsidies persist in many developed countries, and so do some extraordinary tariff peaks. This is what led to the formation of the G-20 coalition of developing, agricultural exporting, countries in the WTO. They want to redress the continued imbalance in WTO rules.

Worse, the problem of food export restrictions finds almost no place in that global rule-book today. Export restrictions, unfortunately, can be none other than “starve-thy-neighbour” policies, bringing importing countries on their knees to plead for food security. In particularly thin international markets, like the rice market, where only 7% of global production gets traded, such restrictions can prove catastrophic. And let us not forget that export restrictions were right at the heart of the 2008 so-called “food price crisis”, with one restriction triggering another through the panic buying and hoarding of food.

Ladies and gentlemen, to sum up: let us get our policy mix right on food production and on trade. We need to ask the difficult questions.